US stocks fall on global economic worries

STAN CHOEAP Business WriterPublished: August 16, 2011 12:13PM

NEW YORK (AP) -- More evidence of a slowing global economy sent stocks falling Tuesday and threatened to end the market's three-day rally.Germany's economy stalled last quarter and dragged down growth for Europe. In the U.S., reports painted a mixed economic picture: Housing remains weak, but factory output rose last month at its fastest pace since the March earthquake in Japan disrupted global manufacturing.Worries about the economy overshadowed strong profit reports from U.S. companies.The Dow Jones industrial average fell 33 points, or 0.3 percent, to 11,450 at noon in New York. It had been down more than 120 points in the half hour after trading opened. The Dow has ended each of the last six trading days up or down by at least 100 points.The Standard & Poor's 500 index fell 5, or 0.5 percent, to 1,199. The Nasdaq composite fell 18, or 0.7 percent, to 2,537."Investors don't know which way to go here," said Paul Brigandi, senior vice president of Direxion Funds, which has $7 billion in assets under management. Stocks look cheaper after the S&P 500's 10.4 percent drop from July 21 to Monday, but investors are still worried about the global economy and debt problems in both the United States and Europe. "And it's a cause of concern because there's no real solution to those problems yet," he said.Prices for gold and Treasurys rose as dollars moved into investments considered safer. Oil fell on worries that a weaker economy will mean less demand for energy.Fitch Ratings also said Tuesday that it will keep its credit rating on the United States at the top grade. Two of the three major credit-rating agencies now have stood by their AAA grade of U.S. debt. Standard & Poor's downgraded the U.S. on Aug. 5. That sent stocks on a volatile skid last week.Europe's economy and debt troubles have been among global investors' main concerns over the last year and a half. On Tuesday, the European Union reported that economic growth in the 17 countries that use the euro slowed to 0.2 percent between April and June from 0.8 percent in the previous quarter. Germany's growth fell to 0.1 percent from 1.3 percent.That will make it even tougher for Spain and other countries to raise revenue. Some European countries have borrowed so much that they may need help repaying debt. The leaders of France and Germany, the eurozone's biggest economies, are meeting Tuesday in Paris to talk about the region's debt problems.In the U.S., homebuilders are still stuck in their years-long slump. They broke ground on new homes at an annual pace of just 604,000 last month, according to the Commerce Department. That's down from 613,000 in June. In 2005, before the housing bubble burst, housing starts were typically above 2 million.Manufacturing may be recovering. Industrial production rose 0.9 percent last month on a pickup at auto factories, utilities and mines. Manufacturing had been one of the strongest industries since the recession ended in 2009, but its growth had been slowing this year.A separate report showed that prices for imports rose 0.3 percent in July because costs rose for fuel and fertilizers. Prices for U.S. exports fell 0.4 percent, the first drop in a year.Wal-Mart Stores Inc. rose 3.9 percent after it said net income rose 5.7 percent last quarter from a year ago on strong overseas sales. Earnings growth was stronger than analysts expected, and the world's largest retailer raised its profit forecast for the year.Home Depot Inc. rose 4.8 percent after it said second-quarter net income rose 14 percent and raised its profit forecast.Saks Inc. fell 2.8 percent after it said it's going into the fall season "a bit more cautiously." Its higher-income customers have been spending more, because they're more protected from the weak job market than middle-income Americans. But the volatile stock market could dent wealthy shoppers' confidence. Saks said its revenue rose 13 percent last quarter from a year ago, and it reported a loss of just $8.4 million versus its loss a year ago of $32.2 million.Urban Outfitters fell 7.8 percent, the most among stocks in the S&P 500. It said late Monday that its profit fell 21 percent last quarter on higher costs for catalogs and technology.Energy stocks in the S&P 500 fell 0.7 percent after oil dropped 55 cents per barrel to $87.33.The yield on the 10-year Treasury note fell to 2.27 percent from 2.31 percent late Monday as investors moved into things considered safer. A bond's yield falls when its price rises. The 10-year yield fell to a record low of 2.03 percent last week.Gold rose $18.90 per ounce to $1,777.40. Last week, it rose above $1,800 for the first time.Stocks have been particularly volatile since last week, after S&P chopped the U.S. from its top AAA credit rating to AA+ on Aug. 5. The Dow rose or fell by 400 points in the first four days of last week, the first time that has happened.The Dow rallied 213 points on Monday after a series of acquisitions, highlighted by Google's $12.5 billion purchase of Motorola Mobility. It marked the Dow's first three-day gain since July 1. Its rise of 763 points over the three days was the Dow's biggest since November 2008, during the depths of the financial crisis.